London was a financial center and a port city and each of these roles supported the other. It was convenient for a port city to offer insurance and other financial services and a financial sector found considerable demand for its services from merchants and ship owners. Across the North Sea was another considerable port city, Hamburg. Like Antwerp and Amsterdam, it too was a leading port city in Continental Europe. It was also a financial center which produced a few banking families. One of these was the Schröders.
Hamburg
Hamburg, where the Elbe meets the North Sea, was a port city of the Hanseatic League in the Middle Ages. It became the leading German port with a population of 90,000 by 1750, behind only London and Amsterdam in prominence among European port cities. While it was not the metropole of a larger empire, the city’s merchants trafficked in goods from far afield. Its merchants traded with the Iberian Peninsula and the Americas as well as the Baltic and Russia. In the 18th century, Hamburg benefited from various wars which disrupted trade elsewhere; the city was neutral during the Seven Years’ War, for example.
Later in the century, British trade with Europe was routed through Hamburg after the wars of the French Revolution began. During this war, the city tried to remain neutral for as long as possible. So, when the British blockaded French ports, and Antwerp and Amsterdam too after they were captured by the French in 1795, trade was re-routed to Hamburg. Sugar was one established commodity in which Hamburg merchants like the Schröders specialized but British cotton yarn and cloth saw surging demand. The commercial links with Britain were significant at the end of the 18th century and, though a German city, Hamburg was associated with British trade and finance for much of the 19th century.
Hamburg was the home to merchant families like the Schröders and Brandts. Salomon Heine, uncle of the poet Heinrich Heine, was a prominent Hamburg banker and the Warburg banking family also originated from Hamburg. In 1850, the city was the largest port in Continental Europe and Hamburg remained a significant city, not just in German trade but in international trade finance and merchant banking too, even when other German financial centers overtook it in terms of domestic business. While not particularly known as a major city for raising big loans, like London, Paris or even Amsterdam, the Kingdom of Prussia did float a bond in Hamburg back in the 1790s.
The Schröder Family
The Schröders were a merchant family whose first ancestor for which anything substantial is known settled in the market town of Verden, near Bremen, in the late 17th century. He was a manufacturer in the tobacco industry. Anthon Schröder, born in 1697, was the first merchant of the family, establishing Anthon Schröder & Co. in the town of Quakenbrück. Each of his sons became merchants too.
C. M. Schröder & Co. was founded in Hamburg by one of them, Christian Matthias Schröder, who moved to that city in 1762. This was a trading firm active in distributing colonial goods, as well as products from the Baltic, across Europe. Other sons of Anthon Schröder formed a wine trading firm and one formed a trading company in Bremen. The Schröder firms had expanded into Amsterdam in the 1780s. These outposts cooperated closely even where they were owned and run by different members of the family. While comprised of separate companies, Schröders remained essentially a tight knit family business until well into the subsequent century.
Before then though, the business was greatly enlarged. C. M. Schröder & Co. purchased its first ship in 1776 and four more by 1780. The ships connected Hamburg to the port cities that received colonial goods in Portugal and France. In 1782, a Schröder ship made its first transatlantic crossing of its own.
London
London, like Hamburg, was a large port city. It may seem inevitable that a growing Schröders firm would eventually expand across the North Sea to London but a long-lasting presence there did not come for decades. C. M. Schröder & Co. joined the Hamburg England Fahrer Gesellschaf, or ‘Company of Merchants Trading with England’ in 1780. In prior years, Schröder kept one ship on a North Sea crossing to England but this continued only until 1781.
For the next fourteen years, the company was largely engaged in trading with Portugal and France, with little involvement in trade with Britain. When the wars of the French Revolution closed French ports, the company continued trading with Portugal, also a neutral country at this stage in the war, and increased its Russian trade. Yet, it was still doing little business with London.
Even direct trade with the newly-independent United States was done before a Schröder ship would return to London. A C. M. Schröder & Co. vessel called on Charleston in the United States in 1795 and again in 1796.Only in 1797 did the firm recommence sending ships to trade with London. By now, British trade with Hamburg was booming. Shipments from Britain to the German port city grew from 6,000 tons in 1789 to 60,000 tons in 1800.
London’s importance in European trade increased after the French occupation of Amsterdam greatly reduced the latter’s commercial relevance. A member of the family, Bernard Heinrich Schröder II, relocated to London in 1797 and became the family’s agent there. He was joined by Johann Friedrich Schröder around 1800 who started a London firm J. F. Schröder & Co. and who was in turn joined by his brother Johann Heinrich Schröder in 1802.
The shift to London came at a good time as Hamburg’s fortunes turned starting in 1799. It was no longer able to hold out in the wars then underway and a French embargo was imposed on the city in retaliation for its trading with Britain. Now cut off, local merchants were unable to offload merchandise and 150 firms there went bankrupt. There was then a Prussian and then a Danish occupation of the city until 1801. Things improved during a brief period of peace but the following years brought still more disruption to Hamburg’s trade.
Hamburg would recover in time but in the subsequent decades, London became the clear financial center of Europe. Its stature was supported by high local savings invested into the large foreign loans raised in London. More immediately relevant to trade though, London had well-regarded marine insurance and merchant banking industries. The Schröders came to be involved in both.
Activity and Growth in the 19th Century
By 1812, the Schröder firms had branches not just in Hamburg, Amsterdam, and London but also in St. Petersburg and Riga. The London branch of the Schröder firm traded in sugar, a product re-exported through Britain, from its colonies to markets in Europe. The company traded for its own account, jointly with other firms, and as an agent. The latter role involved acting as a local partner arranging shipments, insurance, and the sale of cargoes on a commission basis for other merchants.
It also financed the trade of other Schröder firms or those of partners. Schröders financed trade by ‘accepting’ bills. This involved guarantying obligations of other merchants and facilitating their payment in places outside where the merchant was based; this allowed the latter to finance their trade by making their obligations trustworthy and marketable. This ‘acceptance’ business picked up as the Napoleonic Wars came to an end, particularly after the French withdrew from Hamburg in 1814. Financial activities became a meaningful part of the Schröders’ business. The London branch of the family firm, J. Henry Schröder & Co., included the title ‘Merchants & Bankers’ in their name. In addition to this work, Johann Heinrich Schröder even became a member of Lloyds, the insurance marketplace, and served as an intermediary arranging insurance for shipments.
After the Napoleonic Wars, London benefited from the demise of trading companies with legal monopolies and the opening up of Latin America to British trade as countries there became independent. Johann Heinrich Schröder not only reorganized the London firm in 1818 but also came to run J. H. Schröder & Co. in Hamburg. By the end of the 1810s, Schröders in London began financing some trade for merchants with no connection to the family though they still largely focused on trade in grain, cotton, and sugar,
A new partner, Herman Otto von Post, invested new money in the mid-1820s and the firm took on new business. Further injections of new capital like this came from time to time. In addition to trading in British cotton products exported to Hamburg and Hamburg re-exports of wool to British textile manufacturers, the firm was now trading in American products and even French products now that peace with France had finally returned. In any case, in the early 19th century, the Schröder firms were still small compared to the business firms like Barings and Rothschild were doing in London.
Still, new Schröder trading firms or branches were formed in Liverpool in 1839, in Trieste in 1843, in New Orleans and New York in 1848 and 1856 respectively, and then as far away as South America. In the 1850s, the firms’ financing activity picked up but was still largely focused on financing trade on behalf of merchants.
From this point, the London firm became the most significant; the Hamburg branch failed in 1857 due to defaults by merchants owing it money. The London branch prospered though and, in 1870, trade finance overtook handling shipping consignments as the firm’s main business. Schröders survived a few crises that forced competitors to close and new capital allowed it to grow its business of accepting merchant bills. Trade finance was not the full extent of its business though. By the early 20th century, Schröders was in the same league as Barings and Rothschild, often underwriting big bond issues alongside them.
Lesson
Before financial services could be offered over long distances, prominent port cities were often, out of necessity, leading financial centers as well. This brought leading suppliers of capital in close proximity to some of its largest users, namely merchants. But merchants were not mere users of financial resources throughout history; rather, many merchants became bankers as well. To some extent, this was because they understood trade and so were in a good position to finance it; they also often had surpluses beyond what they had immediate need for. Further, merchants were already accustomed to acting as trustworthy reliable agents for other merchants. The Schröders of Hamburg were a fine example of a merchant family turned financiers, and not just in one country, but two.
More from the Tontine Coffee-House
Read about the Hope family, another banking family that spanned two countries. Also, consider the role of bills drawn on London in facilitating global trade. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.
Further Reading
1. Cassis, Youssef, and P. L. Cottrell. Private Banking in Europe: Rise, Retreat, and Resurgence. Oxford University Press, 2015.
2. Kindleberger, Charles Poor. The Formation of Financial Centers: A Study in Comparative Economic History. International Finance Section Department of Economics, Princeton University, 1974.
3. Llorca-Jaña, Manuel. “Shaping Globalization: London’s Merchant Bankers in the Early Nineteenth Century.” The Business History Review, vol. 88, no. 3, fall 2014, pp. 469–95.
4. Roberts, Richard. Schroders: Merchants and Bankers. The Macmillan Press, 1992.
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